Citizens drops uncapped rates for new customers

TAMPA — Florida’s largest property insurance company backed away Thursday from a plan to allow unlimited rate increases for new customers in the face of criticism from consumer advocates and two elected officials who helped draft the current rate cap.

The state-run Citizens Property Insurance board of directors voted to study the issue further, leading Sen. Mike Fasano, R-New Port Richey, to declare “the policyholders of the state of Florida can take a bit of a sigh of relief today.”

Board member John Rollins amended his proposal for uncapped rates on new customers after Fasano testified against the plan and Citizens’ Chairman Carlos Lacasa read letters from the state’s chief financial officer and insurance consumer advocate opposing the idea.

“My goal is to keep the conversation going, ensure the consumers of the state that we’re not going to take a hasty action, or a backdoor action, but allow for the numbers to reveal themselves so we can make a decision,” Rollins said after the vote.

But Rollins and other board members made clear they believe Citizens needs higher rates and expect the issue to resurface.

“It must be that rates are part of the conversation about how to return Citizens to a market of last resort and bring the private market back in,” Rollins said. “I don’t think we can avoid that.”

Prodded by Gov. Rick Scott to shrink Citizens, the company’s board has pushed a series of new policies that limit coverage for everything from pool enclosures to condo buildings with short-term rentals. But the plan to uncap rates is the most controversial move to date.

It is also legally questionable.

Citizens’ attorney told board members that “a reasonable fresh look” at language in the 2009 law creating the company’s 10 percent cap on rate increases could conclude that the cap does not apply to new policies.

“A new premium for a new policy is not a rate increase; it is a new rate,” said attorney Charles Sumner.

But Lacasa read a letter from the Florida CFO Jeff Atwater, who was president of the Senate when the rate cap was adopted, stating: “the removal of the cap for new business is beyond the scope of legislative intent.”

Florida’s Insurance Consumer Advocate Robin Westcott also submitted a letter opposing the plan and Fasano, who was Atwater’s second-in-command in the Senate in 2009, appeared in person to voice his opposition.

There was no scheduled period for public testimony at the meeting but Fasano asked Lacasa to speak. He was the only person to address the board other than Citizens’ staff.

“People are frustrated, confused and absolutely sick of what they continue to hear and see and read as far what’s next on the horizon in regards to their premium,” Fasano said.

Lacasa said after the meeting that he wants Citizens’ staff to develop a more detailed analysis of how consumers would be impacted if rates are uncapped.

Some of Lacasa’s concerns: “What would the rates be? Who would be impacted? Is there an over concentration of geographic impact? And options such as a glide path even for these new rates.”

Citizens interim CEO Tom Grady presented a slide Thursday showing Citizens’ rates have increased 20 percent since 2009 and company officials believe they should have increased another 40 percent during that period.

But some Citizens board members said any decision on lifting the rate cap should be left to the Legislature.

“They’re the ones who put the glide path in place and if it needs to be clarified they should be the ones to clarify it,” said board member Don Glisson.

Citizens was created as the insurer of last resort in Florida for homeowners who cannot find coverage anywhere else. It now has more than 1.4 million policies, roughly a quarter of the state’s home insurance market.

Scott and other proponents of boosting Citizens rates argue that the company has crowded out the private insurance market by artificially suppressing rates, making it difficult for private insurers to compete. But Florida has gone an unprecedented six straight years without a hurricane, allowing private insurers to reap huge sums in premiums.

Citizens is also in better shape financially than many private insurers, with more than $6 billion in reserves — enough to withstand even a succession of hurricanes similar to those in 2004-05.

Raising rates is no guarantee that private insurers will return to the state in droves, Fasano said, noting that a recent state law that makes it more attractive for private companies to operate in areas with sinkholes has had little impact.

Citizens’ Chief Financial Officer Sharon Binnun said Thursday that more than half of Citizens’ policies are never likely to be placed with a private company.

That means Citizens will continue to be the primary or only option in some parts of the state, and raising rates is likely to discourage new home purchases, Fasano said.

“You will hurt our economy,” Fasano told the board. “Our housing industry in the state is already hurt, this will be the final nail in the housing industry.”

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